Factors that bank consider before giving us loans

[btaliat]

The financial institution recognized by the law of the land to give out is the bank. Though it is not a news that many online applications are now performing the functions.

Banks don't really give out loans without consering some factors. These factors are there to safeguard the repayment of the loan more of at the favour of borrower.

The first thing a bank will be wary of is the amount to be borrowed. Banks will always put that one first to determine the right and suitable collateral that will be apted for the said loan.

Not only that, the viability of the company is the next target of the banking institutions, they will want to know whether the company or the individual is capable of repaying thr loan without any hassle.

Bank will never make mistake of considering the repayment duration. You don't expect a bank to give out a loan and leave you alone. You must tell them when you are willing to repay the loan.

 

[A K Rao]

Banks before giving the loans to its customers take certain factors into consideration. They see if the customer can repay the loan or not. For tis most of the banks want collateral security or they want to have some assets as a mortgage. They give the loan on higher interest rates than the interest they pay its customers. Nowadays, educational loans are given by mortgaging the Degrees too.

 

[sincerem]

Already the repayment term is well stated and signed in the agreement book in the banking institution. Again bank will ask for your next of kin, your back up person, collateral especially when you're taking large sum of money for business establishment or whatever. Bank doesn't give money to criminals they give to responsible men and women which won't toil over with their bank funds.

 

[Abigael]

Banks really have their considerations before giving you a loan. They will check your credit reputation and capability to pay it back. And they won't give you a loan and leave you alone like everyone want?. They must give you a date which you are expected to pay back. They also take collateral whose price is equivalent to the loan you are taking.

 

[Alexandoy]

Based on my experience of working in a commercial bank the 2 basic requirement for a loan applicant is the capacity to pay and the willingness to pay. The 3rd one is the collateral which should have a higher value than the loan amount. The capacity to pay is the installment amount must be at least less than 25% of the net income.

 

[Sherman198]

Banks too wants to make profits....They are also business enterprise. Their sole purpose is to make profit. That's why you will have huge interest on your loan. The collateral they ask for Sometimes can worth more than what you are asking for.

That's why people are borrowing against their Bitcoin now. They borrow online and use their Bitcoin as collateral. Before the duration of their loan expires, Bitcoin increases in value, they pay back with the gain they made. Risky though.....but everything is risk.

 

[Augusta]

I think the first thing they consider is the borrower collateral. You need to have what they can auction very fast and at a very low rate in case you can't pay back. So if you need the bank to hear you out almost I'mmediately have a backup like a landed property that they dispose of, then you would get the loan very fast

 

[Mika]

You need a project work, a work that shows how much money you need and what you are going to do with the money. You need a collateral to give because in case you fail bank can recover by selling your collateral, you also need to show your income source to make them certain that you can pay the loan.

 

[Bashbash]

The loan I took in the banking from the office is without collateral ,my job serve has the collateral but if you don't have a government job you drop a document for your land or something they can sell easily if you don't pay back on time , some thing that can be auction easily

 

[Good luck]

You must have an account with the bank and also have a very good credit with them before you can be given loan either short or long term.You must also be able to agree to their terms and conditions before the loan applied for will be granted.You must also be able to supply every documents needed for your loan to be released.

 

[sincerem]

Banks simply looks at our credit score, when it is very much high they consider us for loan too. When we have previous outstanding debts they wouldn't consider us for any loan. What really matters it's when it comes to paying on time before expiration or repayment due. If we pay on time it boosts our credit score.

 

[Deleted member 28127]

The bank is seeing if your business is profitable or not because the idea could seem interesting however in reality it is totally different because there is a bit of difference between what you are planning to do and what is in real life or market requirement and the bank has more experience than you then it could simply not giving a loan if he has doubt that your project will survive long term.

 

[Jasmine]

I order to get a loan from banks, your business needs to be already active. When I say active, what I mean is your business need to be functional, so that you can show your registration papers, audit records, sales record, etc. You also need fixed assets such as land, property, or gold that you can use as collateral. Generally speaking, you cannot get a loan from the banks if you cannot provide security. Getting a loan from banks involves a lot of paper works, you also need your credit score high without any outstanding loans or debts. You can get a loan only when your business is legit.

 

[SMART21]

Very Useful Information from all comments and article!

Thank you very much!

 

[Mellorando]

One important thing that you have to understand is that the approval of the loan is not an easy process. Most people do not even know about the things that are required for getting the bank to approve the home loan. Banks have the freedom of rejecting home loan applications because of several factors, depending on the credit history, the credit score, the home builder’s reputation, the location of a particular property, and most importantly, the relationship that you share with the bank. Few banks have the option of internal scores, which are used for understanding whether a particular person is eligible for the home loan.

Given below is a list of the factors that banks prefer looking at before approving home loans:

1. Credit history
Banks prefer lending money to people who are known to have good financial habits. Credit scores are responsible for telling several things about the current financial health. Whether you are paying your EMI on time or you have defaulted can easily be checked through the credit report. This credit report is normally maintained by several bureaus. Generally, a credit score of 800 is considered to be the best score. However, if the score is less than 300, the application for a home loan can be rejected. You can get your loan approved in a fast and hassle-free manner if your credit score is great. Also, a good credit score means that the lender will pass your home loan without any extra doubts.

2. Occupation
Certain occupations are preferred by the banks. For example, government employees are given priorities because the job that they have is stable. After the government employees, banks prefer those people who are associated with blue-chip doctors and companies. Next, lawyers, engineers, as well as accountants are preferred. Also, people who are working in private companies as well as are self-employed get low scores. Occupation is undoubtedly one significant factor that is considered when a home loan is upraised. This factor is important because the repayment capacity is dependent on the amount that a particular person is bringing home. For instance, if a particular person is associated with an organization that does not have a great history of clearing salaries as well as dues to employees, the home loan application will be weakened. Similarly, any borrower who is switching jobs often is giving a negative impression to the bank. Also, all the applications will be treated in an equal manner, whether the applications are of government employees or employees associated with private sectors.

3.Age
Age is an important factor; which banks consider before giving home loans. People belonging to the age group of 30 and 50 years are preferred by banks because they are financially stable in comparison to the other age groups. Also, they have several years left in their job, which will help them to repay the loans. Similarly, people who have already crossed the age of 60 are responsible for faring the worst when it comes to the internal scores of the banks.